Iran: Rouhani's Re-Election Is Not the Key to the Country's Economic Recovery

The true culprit in Iran's economic failure is Iran itself, whose internal barriers make a flourishing economy a pipe-dream. These include: the absence of free-market competition, due mainly to the monopoly of conglomerates affiliated with Ayatollah Khamenei and the Revolutionary Guards over a huge sector of the country's economy, which affects at least half of its GDP; the precariousness of the rule of law; the deterioration of human rights; and the exorbitant cost of military intervention in Syria, Yemen and Iraq, as well as the bankrolling of the Lebanon-based Shiite terrorist organization Hezbollah and other regional proxies.

The clear victory on May 19 of incumbent Iranian President Hassan Rouhani over his key rival, Ebrahim Raisi -- the candidate supported by Supreme Leader Ayatollah Ali Khamenei and the Islamic Revolutionary Guard Corps (IRGC) – indicated that voters were concerned above all with the economy. Raisi, an extremist and isolationist like Khamenei, was the candidate who represented hardline power politics and Middle East hegemony.

It was during Rouhani's first term in office that the nuclear deal, the Joint Comprehensive Plan of Action (JCPOA), was signed between Iran and six world powers. This not only led to the lifting of crippling international sanctions from the regime in Tehran, but seemed to signal an effort to renew diplomatic and commercial ties the West.

Iran initially benefited greatly from the JCPOA. From the document's signing in July 2015 and up until early 2017, dozens of delegations from Western countries visited Iran, and hundreds of economic memoranda of understanding were reached.

Excitement could be felt within and beyond Iran's borders. Despite his decades as a prominent member of the mullah-led regime's security apparatus, President Rouhani was and largely still is viewed in the West as a moderate. In addition, the appetite of Iran's 80 million-strong consumer market for Western goods was high, as was the need for Western investment and technology to rebuild Iran's outdated infrastructure. Meanwhile, Western companies were eager to enter the potentially lucrative market, imagining post-JCPOA Iran to be like the mythical Spanish city of gold, El Dorado.

The fantasy, however, never materialized. The wave of signed agreements fizzled out, and although oil exports did reach pre-sanctions levels, Iran's poor legal structure, strangling regulations, corruption and mismanagement hampered economic growth.

Furthermore, although Rouhani's most important achievement was drastically to lower inflation, this had the terrible side-effect of skyrocketing the unemployment rate.

In addition, a tsunami of bankruptcies swept away hundreds of businesses. In the past two years, at least 14 out of 31 private and government banks have gone under, as have 16 out of 20 pension funds.

Undoubtedly, a contributing factor to Iran's economic failure is the refusal of major European banks to finance trade deals, coupled with an extension of American sanctions and the suspicious attitude of U.S. President Donald J. Trump.

The true culprit, however, is Iran itself, whose internal barriers make a flourishing economy a pipe-dream. These include: the absence of free-market competition, due mainly to the monopoly of conglomerates affiliated with Khamenei and the IRGC over a huge sector of the country's economy, which affects at least half of its GDP; the precariousness of the rule of law; the deterioration of human rights; and the exorbitant cost of military intervention in Syria, Yemen and Iraq, as well as the bankrolling of the Lebanon-based Shiite terrorist organization Hezbollah and other regional proxies.

It is safe to assume, therefore, that despite Rouhani's re-election, prospects for economic recovery are bleak and will remain so until Iran's strategic political trajectory undergoes a complete transformation.

Comment on this item

Name:

Email Address:

Comments:

Email me if someone replies to my comment

Note: Gatestone Institute greatly appreciates your comments. The editors reserve the right, however, not to publish comments containing: incitement to violence, profanity, or any broad-brush slurring of any race, ethnic group or religion. Gatestone also reserves the right to edit comments for length, clarity and grammar. All thoughtful suggestions and analyses will be gratefully considered. Commenters' email addresses will not be displayed publicly. Gatestone regrets that, because of the increasingly great volume of traffic, we are not able to publish them all.

2 Reader Comments

af • May 25, 2017 at 14:00

Calling Rouhani a "moderate," is comical. Just that he's maybe a smidgen more moderate than his "opponent." If he wasn't approved by the ayatollah, he wouldn't be allowed to run in the first place. The primary reason he was chosen to run and win, is because he presents a slightly more warm and fuzzy face to the outside world, than his hard-line opponent.

One of Obama's more stupid acts as POTUS, was to sit on his ass and do nothing, when the Arab Spring came to Tehran.

Reply->

Bisley • May 25, 2017 at 13:21

Rouhani's election means nothing, other than that he's approved by the council of ruling clerics to continue carrying out and imposing their policy. No one is allowed to run for office without their permission, and it makes no difference who wins.

Ali Mohammed al-Nimr, a prisoner in Saudi Arabia who was sentenced to death as a minor, faces "death by crucifixion" after a final appeal has been dismissed. He was arrested in 2012 when he was just 17, during a crackdown on anti-government protests in the Shiite province of Qatif. According to the International Business Times, Al-Nimr was accused by the authorities of participation in illegal protests and of firearms offences, despite there being no evidence to justify the latter charge.